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My first earnings short-squeeze play is bed manufacturer and retailer
Select Comfort (
SCSS), which is set to release numbers on Wednesday after the market close. Wall Street analysts, on average, expect Select Comfort to report revenue of $277.47 million on earnings of 43 cents per share.
The current short interest as a percentage of the float Select Comfort is extremely high at 18.2%. That means that out of the 53.98 million shares in the tradable float, 9.82 million shares are sold short by the bears. The bears have also been increasing their bets from the last reporting period by 32.7%, or by about 2.41 million shares. If the bears get caught pressing their bets into a bullish quarter, then shares of SCSS could easily explode to the upside post-earnings as the shorts rush to cover some of their bets.
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From a technical perspective, SCSS is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been trending sideways inside of a consolidation pattern for the last month and change, with shares moving between $23.81 on the downside and $26.47 on the upside. Any high-volume move above the upper-end of its recent range post-earnings could trigger a big breakout trade for shares of SCSS.
If you're bullish on SCSS, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $26.47 to $27.84 a share and then once it clear some past resistance at $28.94 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 1.15 million shares. If that breakout hits, then SCSS will set up to re-test or possibly take out its next major overhead resistance levels at $34.38 to $35.60 a share.
I would simply avoid SCSS or look for short-biased trades if after earnings it fails to trigger that breakout, and then drops back below its 50-day moving average at $24.01 a share to its 200-day moving average at $22.75 a share with high volume. If we get that move, then SCSS will set up to re-test or possibly take out its next major support levels at $20.48 to $18 a share.